Dexus and DWPF today announced that they have jointly entered into an agreement to each acquire a 50% interest in 90 and 100 Mount Street in North Sydney.
11 February 2016

Dexus and DWPF acquire North Sydney site for premium office development

Dexus (Dexus) and Dexus Wholesale Property Fund (DWPF) today announced that they have jointly entered into an agreement to each acquire a 50% interest in 90 and 100 Mount Street in North Sydney (“100 Mount Street”) for an initial acquisition price of $41.0 million1 . A new premium office tower will be developed at the site by Dexus, and the project will be completed at a time when tight supply fundamentals are expected in the Sydney office market.

Dexus and DWPF have also entered into a fixed price Design and Construction contract with Laing O’Rourke Australia for the demolition of the two existing buildings and the construction of a DA approved 41,163 square metre premium office tower.

Darren Steinberg, Dexus CEO said: “This is an excellent opportunity for us to develop a well-located premium office tower in the North Sydney CBD. This development is set to benefit from improved amenity in the North Sydney market, including the proposed Sydney Metro line, as well as continued tenant demand for quality product in a market which has limited Prime grade options. The project is also expected to be completed at an opportune time in relation to Sydney office market supply fundamentals.”
Penny Ransom, DWPF Fund Manager said: “We are excited by this opportunity to further diversify DWPF’s office exposure into the North Sydney market, while increasing the quality of the Fund’s portfolio."

Dexus notes the intentions regarding the sale of the Laing O’Rourke Australian construction business. The project team together with Dexus brings together the best in Australian and international expertise including Chicago headquartered architects SOM working in conjunction with local firm Architectus. Laing O’Rourke combines a local and global high rise construction pedigree on the project and has agreed contract conditions to ensure that this standard is maintained throughout the proposed sale of the Laing O’Rouke Australian construction business.

Further details in relation to the acquisition are provided in the Appendices.

Development overview

Dexus will develop 100 Mount Street, North Sydney as a 34-level premium office tower spanning 41,163 square metres. This prime development site occupies one of the best locations in North Sydney on the corner of Mount and Walker Streets with a third street frontage to Spring Street. The site has prime retail exposure and benefits from its proximity to key transport infrastructure, in addition to excellent natural light and Harbour views from its eastern and southern aspects.

The anticipated total development cost including the initial acquisition price is $467.5 million2. Subject to the final settlement date, the development is expected to commence in July 2016 with a staged practical completion from June 2018 to December 2018 to enable early access and integrated fit-out works prior to final practical completion. A long term lease across 6,229 square metres has also been secured with Laing O’Rourke Australia from final practical completion in December 2018, with lease up expected to continue throughout 2019.

The development will target 5 star Green Star and 5 star NABERS Energy ratings, and will offer office floor plates ranging from 1,200-1,300 square metres.  1 Excluding acquisition costs. 2 Reflects 100% of development cost in which Dexus and DWPF each have a 50% interest. Includes initial acquisition price of $41.0 million, acquisition costs, demolition, construction and other associated costs.

Impact on Dexus

As a result of this transaction, the office weighting within Dexus’s total property portfolio will increase by 0.4% on a fully completed pro-forma basis.

Settlement is subject to a number of conditions precedent and is expected to occur during or after April 2016 once those conditions are met. The acquisition will have no impact on Dexus’s FFO per security or distribution per security guidance for FY16.

Dexus will fund its share of the initial acquisition price through debt facilities and will continue to maintain gearing within its target gearing range of 30-40%.

For further information please refer to the pdf.